TEST BANK
CAPITAL MARKETS: INSTITUTIONS AND INSTRUMENTS
FABOZZI/MODIGLIANI
Chapter 23
CORPORATE SENIOR INSTRUMENTS MARKETS: II
MULTIPLE CHOICE
1. Preferred stock is classified as a senior instrument in that holders of these securities:
[M]
2. The largest group of investors in corporate bonds is:
[E]
3. The promises of corporate bond issuers and the rights of investors who buy them are set
forth in great detail in the:
[E]
4. The important aspects outlined in a bond indenture include the bond’s:
5. Most corporate bonds are:
[M]
6. Corporate bond issues that are arranged so that specified principal amounts become due
on specified dates prior to maturity are called:
[M]
7. Bonds secured by real property or personal property are called:
[M]
8. An obligation guaranteed by another entity is called a:
[M]
9. Which of the following allows for paying off bonds prior to maturity?
10. As a general rule, bonds are callable at:
[M]
11. If the issuer of a bond has the choice to retire all or part of an issue prior to maturity, the
bondholder is exposed to:
[M]
12. The provision in a bond indenture that may require the issuer to retire a specified portion
of an issue each year is the:
[M]
13. The bondholder is given the right to sell the issue back to the issuer at the par value on
designated dates in a:
[M]
14. Medium-term notes are:
15. Corporate bond issuers use the proceeds from a bond sale for:
[M]
16. Deferred-interest bonds:
[M]
17. In contrast to corporate debt, medium-term notes (MTNs) are:
[M]
18. MTNs created when the issuer simultaneously transacts in the derivative markets are
called:
[M]
19. A type of preferred stock in which the dividend payment accrues until it is fully paid is
called:
20. Corporations receive what federal tax exemption on qualified dividends of preferred
stock?
TRUE/FALSE
1. A subordinated debenture bond has priority over senior corporate bonds.
[M]
2. Failure to make preferred stock dividends does not force the issuer into bankruptcy.
[M]
3. Medium-term notes (MTNs) are registered with the SEC under the shelf registration rule.
[M]
4. Preferred stock as a class of stock has characteristics of both common stock and debt.
[E]
5. Collateral trust bonds pledge real property or personal property to offer security beyond
[M]
6. A debenture bond is an obligation guaranteed by another entity.
[M]
7. A convertible bond is a corporate bond with a call option to buy the common stock of the
issuer.
[M]
8. Interdealer systems, also called client-to-dealer systems, typically display to customers
[M]
9. The coupon rate of an MTN with an inverse floating-rate would increase if the
benchmark interest rate increases.
[E]
10. In the Treasury market, the U.S. government does not issue zero-coupon bonds.
ESSAY QUESTIONS
1. Compare and contrast preferred stock and corporate debt.
Key Issues:
2. Explain the advantages and disadvantages of a callable bond.
Key Issues:
3. Discuss electronic bond trading.
Key Issues: